As we continue to work with our lessor and asset manager clients to navigate the effects of the pandemic, it has been encouraging to see the focus shift from crisis management to longer term funding as the industry plans for recovery. We have seen a number of structured finance transactions closing recently (including an engine portfolio securitization transaction arranged by Doric Asset Finance GmbH & Co. KG), and it seems that established lessors and asset managers are very much retaining their appeal in the long term.
This FT article reports on significant fundraising efforts by a number of lessors this month alone totalling $14.9 billion, as investors identify ‘attractive returns in a corner of the airline industry more protected against further fallout from the spread of coronavirus’.
We had noted in various pre-pandemic posts that investors were increasingly asset agnostic, ‘drawn by reliable returns and market sophistication rather than by the assets themselves’ (read more here). While the level of analysis required by financiers may have changed as a result of the pandemic, it is clear that the returns are still there to be made, and despite the disruption of 2020, financiers are willing to invest both time and money in the industry to find them.
Most lessors typically enjoy long lease times, which enables them to straddle difficult patches for the airline industry. Their main risks stem from airlines failing to pay rents, or even going bankrupt. But since airlines have secured capital to help survive the shock of the pandemic, that in turn has bolstered the position of the lessors.